Hyderabad amongst top three office destinations

According to the findings, Hyderabad overtakes Mumbai in the second quarter in leasing activity emerging among the top three office markets after Bengaluru and NCR.

By Author  |  Business Bureau  |  Published: 10th Jul 2017  2:47 pmUpdated: 10th Jul 2017  7:32 pm
Representational Image (TT Photo)

Hyderabad: Hyderabad continued to witness strong leasing activity, registering a quarterly growth of more than 50 per cent over Q1, 2017. Most of the leasing activity was concentrated in IT Corridor.

Office space demand mainly consisted of culmination of pre-leased spaces in a recently completed IT development along with the closure of several large-sized deals in IT Corridor.

CBRE South Asia, in its latest findings from its India Office Market View Report – Q2, 2017, revealed Bengaluru, NCR and Hyderabad emerging as the top three office markets in the country. Hyderabad witnessed significant activity during the quarter, overtaking Mumbai in leasing activity.

IT/ ITeS corporates dominated leasing activity with a share of about 40 per cent, followed by BFSI and research, consulting and analytics corporates. While leasing by IT/ ITeS and BFSI was mainly in medium to large-sized space formats; research, consulting and analytics deals were mainly in the form of medium-sized deals. Sustained occupier demand in the IT Corridor, coupled with limited space availability, resulted in a rental appreciation of about 3-5 per cent quarter-on-quarter (q-o-q) across both IT and non-IT segments.

Low vacancies in IT Corridor coupled with sustained occupier interest led to rental appreciation in the extended IT Corridor, with the IT and non-IT segment recording a rental appreciation of 4-5 per cent q-o-q. Increase in quarterly leasing activity led to rentals rising by about 1-3 per cent on a year-on-year (y-o-y) basis.

New supply added in the form of a large-sized IT development in Raidurg, IT Corridor and a medium-sized non-IT development in Erramanzil, CBD. Rental values continued to grow in IT and extended IT Corridor.

Commenting on the findings of the report, Anshuman Magazine, chairman – India & South-East Asia, CBRE said, “Despite a dip in our GDP numbers during the March 2017 quarter, India’s office market continued to witness sustained activity. With the implementation of several policy reforms underway, including GST and Real Estate Regulation and Development Act (RERA), the fundamentals for the country remain strong. Infrastructure development across major cities, growing prominence of smaller cities for corporates and overall positive sentiment are providing a further boost to the office market which has witnessed positive momentum over the past two years.”

Ram Chandnani, MD – Advisory & Transaction Services, CBRE South Asia, added, “India’s office market continues to perform well despite uncertainties among global corporates in the recent past. Occupiers continue to future proof their portfolios and hedge against future rental escalations by pre-leasing space across various cities. Occupiers, while expanding their footprint across the country and implementing their expansion plans, are also expected to keep a strong check on space utilisation ratios and innovations in workplace strategies. The use of ‘co-working spaces’ is expected to rise, with the concept being adopted not only by start-ups and individuals, but also by organizations with fluid expansion/occupation plans.”

According to the report, leasing activity for prime office space across key cities in India continues to remain strong with absorption crossing 10 million sq ft during the April – June 2017 period. This is a 28 per cent increase over Q1 2017 and signals the continued growth of the segment. The implementation of policy initiatives like RERA are starting to have a positive impact on the overall real estate market in the country.

Sectors driving corporate leasing activity continued to be IT/ITeS, BFSI and Engineering & Manufacturing. Similar to earlier quarters, leasing activity was driven by small and medium-sized transactions (less then 50,000 sq ft) accounting for almost 90 per cent of all transactions reported in Q2 2017.

The share of US-based corporates in quarterly transaction activity increased from 44 per cent in Q1, 2017 to 50 per cent in Q2, 2017, while share of domestic corporates rose from 33 per cent to 37 per cent in Q2, 2017.

On the supply side, development completions more than doubled on a q-o-q basis during Q2 2017, with about 8.2 million sq ft of development completions reported during the quarter.

Bangalore and Hyderabad accounted for more than 60 per cent of the supply addition, followed by Pune and Mumbai.